Premium Pricing

Definition of Premium Pricing

This method revolves around maintaining a fabricated high price of an item to make it seem that it is a really expensive and quality item in the eyes of consumers.

Description of Premium Pricing

This pricing strategy takes advantage of the assumption that expensive means extraordinary, more dependable, best quality, etc., which is what consumers tend to do. Additionally, they don’t mind spending a little more for things that are “in”, which is what drives premium pricing.

Advantages of Premium Pricing

When a business puts in a lot of money into their premium brands, it could be really difficult for a rival to have an item that could compete at that exact price but by not putting in as much money into marketing. Also, typically, there’s a very high gross margin.

Disadvantages of Premium Pricing

It’s often very expensive to keep up with this strategy. You’ll also never be short of rivals; businesses trying to beat you with lower prices. This strategy also doesn’t let you increase your amount of sales. Additionally, you won’t ever be able to make the cost reductions that a company that has lots of sales can make.

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